OMB Begins Holding Stakeholder Meetings for New Fiduciary Rule

The proposal will likely address compensation structures and IRA rollovers, though no draft is available yet.

The Department of Labor continues to focus on its still-unpublished fiduciary rule draft clarifying when advisers providing investment advice for a fee for benefit plans and individual retirement accounts are ERISA fiduciaries, according to information the department provided to a U.S. House of Representatives committee.

The House Committee on Education and the Workforce published written answers on October 11 from DOL Acting Secretary Julie Su to questions from a June hearing hosted by the committee. The written answers included a defense of the unpublished fiduciary rule draft proposal currently being considered by the Office of Management and Budget.

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Su wrote that the purpose of the proposal is to amend “the regulatory definition of the term fiduciary set forth at 29 CFR 2510.3-21(c) to more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries within the meaning of section 3(21) of ERISA.”

The DOL had previously stated that the proposal will change its regulation of “the ways advisers are compensated that can subject advisers to harmful conflicts of interest.” The written answers reword this same concern: “Our concern consistently has been and continues to be with financial arrangements that can present conflicts of interest” for advisers in the retirement space.

This purpose—to broaden the scope of 3(21) fiduciary status for plan advisers to potentially include IRA rollovers and related transactions—is attracting some controversy, despite the fact that no full draft of the proposal is available.

Jason Berkowitz, the chief legal and regulatory affairs officer at the Insured Retirement Institute, says there is an extensive history of litigation establishing that advice concerning IRA rollovers is “beyond [the DOL’s] jurisdiction.” He was referring to a 2016 5th Circuit Court of Appeals decision that ruled IRA rollovers are one-time advice, not a “special relationship of trust and confidence,” and therefore do not trigger fiduciary status under ERISA.

Despite this, the DOL is “not ready to give up that fight,” and “they are not ready to just say, ‘We can’t regulate rollovers,’” says Berkowitz.

For Berkowitz, there is “not a need for further rulemaking with all the changes that have been made,” because of Regulation Best Interest, finalized by the Securities and Exchange Commission after the 2016 decision, which requires advisers to give advice in the best interest of their clients and to disclose conflicts.

IRA rollovers can be complicated transactions, which can expose participants to changes in fee structures. The implications of more sophisticated rollovers, such as from a traditional 401(k) to a Roth IRA, may not be apparent to an unsophisticated investor with no adviser. However, Reg BI applies to rollovers because they involve the divesting of plan assets and re-investing them into an IRA, Berkowitz explains, which is already regulated by the SEC.

The OMB typically takes between 60 and 90 days to review a proposal, but it can also extend the process. The proposal was first sent to the OMB on September 8, so industry actors hope a published proposal will be released for comment between November 7 and December 7.

Berkowitz adds that the OMB has begun holding meetings with stakeholders to discuss the proposal, though a draft is not being made available to stakeholders. He says he intends to tell the OMB that the proposal as he understands it is “not a proposal that should be allowed to come out for public comment.”

2024 Retirement Plan Adviser of the Year Nominations Are Open

If you work with or know of a great plan adviser or adviser team, please help PLANADVISER recognize the best in the business.

PLANADVISER is asking for your help in identifying the best retirement plan advisers in the country. If you work with or know of a great plan adviser or plan adviser team, please help us recognize the best in the business.

For the third year in a row, the awards are being issued in six categories. However, we have separated our recognition for Community Impact and Giving Back into a separate program and replaced that category with 403(b) Plan Service, because it never felt right to select a “winner” in the Community Impact category. We will recognize advisers making a Community Impact through our editorial department and coverage in PLANADVISER.

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In addition, we have added subcategories for our Closing the Coverage Gap award—one for MEPs/PEPs and one for Micro/Startup Plans—to further define what we are trying to recognize with these awards.

Nominations for the 2024 PLANADVISER Retirement Plan Adviser of the Year awards are now being accepted in six categories:

  • Plan Sponsor Service – Nominate individuals only. Finalists and winners in this category stand out for their innovation and dedication in the service of retirement plan sponsor clients, with a particular focus on the efficient and effective delivery of plan-level support. The Plan Sponsor Service category recognizes those advisers directly serving and working with plan sponsors and should be recognizable to the plan sponsor client.
  • Plan Participant Service – Nominate individuals only. Finalists and winners in this category stand out for their innovation and dedication in the service of retirement plan participants, with a particular focus on the efficient and effective delivery of individual-level advice and education.
  • Mentorship – Nominate individuals or teams. Finalists and winners in this category stand out for their commitment and success in supporting the personal and professional growth of their firm’s staff, their fellow advisers and their industry peers.
  • Efforts in Diversity, Equity and Inclusion (DEI) – Nominate individuals or teams. Finalists and winners in this category stand out for their success in addressing the financial services industry’s clear and present diversity problem, with a particular focus on the importance of creating equitable and fair workplaces.
  • 403(b) Plan Service – Nominate individuals only. Finalists and winners in this category stand out for their innovation and dedication in the service of 403(b) plan sponsor clients. The category is intended to recognize those advisers focused on the efficient and effective delivery of plan-level support, not product sales.
  • Closing the Coverage Gap – Nominate individuals only. Finalists and winners in this category stand out for their dedication to helping more Americans, especially those who work for small businesses or who are members of underrepresented communities, gain access to quality workplace retirement plans. The category includes two subcategories to further define the work advisers are doing, whether with multiple employer and pooled employer plans or with startup plans.

Nominations are welcome from plan sponsor clients, employers and brokers/dealers, as well as from working partners of these advisers, such as product and service providers, investment vendors, accountants, attorneys and plan administrators. However, self-nominations are not permitted, and only nominations from plan sponsor clients will be accepted for the Plan Sponsor Service, Plan Participant Service and 403(b) Plan Service categories.

Award recipients across all categories will be honored at the PLANADVISER Industry Leader Awards on in New York City on May 8, 2024. Finalists and winners for Retirement Plan Adviser of the Year awards will be featured online at PLANADVISER.com. Previous Retirement Plan Adviser of the Year winners can be viewed at https://www.planadviser.com/awards.

 The deadline for submitting nominations for the 2024 Retirement Plan Adviser of the Year awards  is December 8, 2023. Questions can be directed to awards@issmediasolutions.com.

The nomination form is here. You may preview the form here before submitting your nomination.

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